ZAKAH AND ITS ECONOMIC ROLE

Transcription

1 ZAKAH AND ITS ECONOMIC ROLE

2 DEFINITION ZAKAH IS:A FINANCIAL-RELIGIOUS OBLIGATION AT GIVEN RATES AND SPECIFIC DISBURSEMENT. ZKATABLE PROPERTIES SCHOLARS WHO RESTRICT IT: WHAT IS MENTIONED IN TEXTS ONLY: ATHMAN LIVESTOCK AGRICULTURAL PRODUCTS SCHOLARS WHO EXPAND IT: ALL KINDS OF WEALTH AND INCOME AT THE TIME OF THE PROPHET: ZAKAH WA IMPOSED ON ALL KNOWN KINDS OF

3 WEALTH & INCOME ZAKAH RATES BEGINS WITH 2.5%, AND GOES ON TO: 5 %, 10 %, AND 20 %. DISBURSEMENT OF ZAKAH THE EIGHT CATEGORIES MENTIONED IN THE QUR AN: ALMS ARE FOR THE POOR AND THE NEEDY, AND THOSE EMPLKOYED TO ADMINISTER THE FUNDS, FOR THOSE WHOSE HEARTS HAVE BEEN RECENTLY RECONCILED TO THE TRUTH, FOR THOSE IN BONDAGE, AND IN DEBT, IN THE CAUSE OF ALLAH, AND FOR THE WAYFARER.

4 EFFECT OF ZAKAH IT IS A TAX ON WEALTH AND INCOME IT DISCOURAGES LEAVING WEALTH IDLE IT RAISES DESIRED RATE OF RETURN ON INVESTMENT IT IS PAYABLE IN PRINCIPLE IN KIND: REDUCING INVENTORY DOES IT INCREASE AGGREGATE CONSUMPTIOM? THIS DEPENDS ON PROPENCITIES TO CONSUME OF THE RICH AND THE POOR IT REDIRECTS AGGREGATE PRODUCTION TOWARDS BASIC NEEDS IT CAN BE USED AS A TOOL OF ECONOMIC POLICY: TIMING OF COLLECTION AND DISTRIBUTION RATE OF ITS MONETARIZATION

5 CHARACTERISTICS OF ZAKAH IT IS PART OF REVELATION FOR HUMAN GUIDENCE, IT DID NOT CAME AS A RESULT OFSOCIAL STRUGGLE AND CONFLICT IT IS FIXED, NO AUTHORITY IS EMPOWERED TO CHANGE IT IT IS A PERMANENT INTRINSIC MECHANISM FOR REDISTRIBUTION. IT CAN ATTENUATE POVERTY THE GOVERNMENT IS RESPONSIBLE FOR ITS PROPER IMPLEMENTATION IT IS SUPPORTED BY RELIGIOUS CONSCIENSENESS ITS BENEFITS ARE NOT BASED ON PRIOR PARTICIPATION ITS MOST IMPORTANT OBJECTIVE IS SOCIAL PEACEAND UPLIFTMENT. PURIFY AND SANCTIFY THEM (11:103) IT TRANSFORMS THE POOR TO PRODUCTIVE ITS PROCEEDS MAY REACH 3% - 7%

6 OF GDP WAQF AND ITS ECONOMIC ROLE

7 A. DEFINITIOIN AND HISTORY OF WAQF WAQF IS HOLDING AN ASSET OFF CONSUMPTION AND DISPOSITION OF ITS FOUNDER, AND ASSIGNING ITS USUFRUCT TO CERTAIN PHILANTHROPIC OBJECTIVES. IT IS OLD, AND PRE-ISLAMIC. THE FIRST WAQF IN ISLAM IS THE PROPHET S MOSQUE IN MADINAH, THEN MUKHAIRIQ S GARDENS, THE WELL OF RUMAH AND, THE KHAYBAR S LAND OF UMAR. ISLAMIC SHARI AH IS DISTINCTIVE IN ITS DEALING WITH WAQF: SETTING A DETAILED LEGAL CODE FOR WAQF CREATING NEW FORMS OF WAQF; ESPECIALLY:

8 - INVESTMENT CHARITABLE WAQF - FAMILY WAQF WHO OWNS THE WAQF PROPERTY? 2- WAQF ASSETS PERPETUAL ASSETS, ESPECIALLY LAND MOBILE ASSETS CASH AND FINANCIAL ASSETS: FOR LENDING FOR INVESTMENT 3- DEVELOPMENTAL NATURE OF WAQF WAQF IS A KIND OF INVESTMENT AS IT HOLDS ASSETS AWAY FROM CONSUMPTION AND IN LONG TERM, USUFRUCT PRODUCING ASSETS

9 IT IS DEVELOPMENTAL BECAUSE IT CANNOT BE SOLD, AND IT INCREASES BY NEW ADDITIONS IT REPRESENTS THE FIRST ATTEMPT TO EXPAND THE ROLE OF THE THIRD SECTOR AND INCORPORATE IT IN THE SOCIO-ECONOMIC LIFE. 4- KINDS OF WAQF RELIGIOUS DIRECT PHILANTHROPIC PRIVATE INVESTMENTAL EXAMPLES

10 5- HISTORICAL GROWTH OF WAQF PROPERTIES SINCE WAQF CANNOT BE SOLD OR DISSOLVED, IT GROWS OVER TIME BY NATURAL GROWTH AND BY NEWW WAQF. IN MANY MUSLIM COUNTRIES: AWQAF REACHED ONE FOURTH AND ONE THIRD OF ALL CULTIVATED LAND AND METROPOLITAN REAL ESTATES

11 6- HISTORICAL FUNCTIONS OF AWQAF IN ADDITION TO MOSQUES CONSTRUCTION, MAINTENANCE AND ADMINISTRATIVE AND ACTIVITIES EXPENSES, THE ISLAMIC AWQAF TOOL MAJOR CHARGE IN THE FOLLOWING: EDUCATION IN ALL LEVELS: FROM ELEMENTARY TO UNIVERSITY, ALL OVER THE MUSLIM LAND SCIENTIFIC RESEARCH IN ALL BRANCHES OF RELIGIOUS, SOCIAL AND NATURAL STUDIES HEALTH CARE SOCIAL CARE

12 HOSPITALS POOR, DESTITUDE MEDICAL SCHOOLS ORPHANAGES DRUGS, PATIENTS BATTERED WIVES PHARMACEUTICAL CHILDREN, SLAVES AND MEDICAL MARRIAGE RESEARCH PRISONERS BIRDS AND ANIMAL CARE ENVIRONMENT RIVER BANKS DEFENSE AND BORDER SECURITY WEAPONS WATER SUPPLY AND MANY OTHER FUNCTIONS 7- WAQF MANAGEMENT

13 WAQF IS THE BACKBONE OF THE THIRD SECTOR. ITS VERY IDEA IS THAT CERTAIN FUNCTIONS ARE BETTER WORKED OUT OUTSIDE BOTH THE PRIVATE INTERESTS AND THE HAND OF THE GOVERNMENT LOCAL ATOMIC MANAGEMET IS MORE COMPATIBLE WITH WAQF THAT ANY GOVERNMENTAL MANAGEMENT. SUCH MANAGEMENT SHALL NEED HELP AND SUPPORT IN AREAS OF : PLANNING FINANCING INVESTMENT CHECKS AND BALANCES ETC.

14 TRAINING COURSE ON ISLAMIC ECONOMICS MONZER KAHF, Ph.D.

15 PRINCIPLES OF THEORY OF MONETARY POLICY IN ISLAMIC ECONOMIC SYSTEM ASSUMPTIONS

16 PROHIBITION OF RIBA IN ALL INDIVIDUAL AND GOVERNMENTAL TRANSACTIONS. APPLICATION OF THE ISLAMIC MODES OF FINANCING, INCLUDING, MUSHARAKA, MUDHARABA, MURABAHA, IJARA, SALAM, ISTISNA, ETC. DEVELOPPED FINACIAL MARKETS AND ISLAMIC FINANCIAL INSTUMENTS THAT CAN BE USED BY MONETARY AUTHORITIES. SHARI AH CRITERIA OF MONETARY POLICY 1 - JUSTICE:

17 IT NECESSITATES AN OBLIGATION TO MAINTAIN PRICE STABILITY IT REQUIRES MAINTAINNING STABILITY OF THE VALUE OF MONEY: NOT TO BREAK THE CURRENCY OF THE UMMAH AND NOT TO MAKE FRAUD IN MONEY IT ALSO CALLS FOR AVOIDING FINANCING BY DEFICIT BORROWING FROM THE CENTRAL BANK, WHICH ALSO VIOLATES THE PRINCIPLE OF TAXATION IN ISLAM THAT REQUIRES TAXES TO BE IMPOSED ONLY ON THOSE WHO ARE CAPABLE. 2- SERVING THE BEST PUBLIC INTEREST: WHAT IS BEST INTEREST CAN ONLY BE KNOWN BY SHURA OR REPRESENTATION 3- EXCEPTIONS FOR NECESSITIES TOOLS OF MONETARY POLICY

18 TOOLS AFFECTING MONEY SUPPLY: ISSUANCE OF FIAT MONEY CONTROL OVER BANKING CREDIT (RESTRICTING BANKS FREEDOM BY VIRTUE OF PUBLIC INTERESTS): RATE OF RETURN ON MYRABAHA RATE OF PROFIT DISTRIBUTION IN MUSHARAKA CEILING OF CAPITAL RETURN IN MUSHARAKA AND MUDHARABA RATIO OF CENTRAL BANK MUSHARAKA WITH COMMERCIAL BANKS RATE OF RETURN ON CENTRAL BANK MUSHARAKA WITH COMMERCIAL BANKS MANIPULATING THE CASH RESERVE RATIO MANIPULATING GOVERNMENT DEPOSITS IN COMMERCIAL BANKS OPEN MARKET OPERATIONS: USING ESPECIALLY IJARA BONDS ISSUED BY GOVERNMENT THEY AFFECT:

19 MONEY SUPPLY RETURN ON CAPITAL TOOLS AFFECTING CREDIT DISTRIBUTION: SECOTAL DISTRIBUTION: CREDIT CEILINGS CREDIT/SELF FINANCING RATIO IN MUSHARAKA, AND MUDHARABA CREDIT TO THE BIG/TOTAL CREDIT MARGINAL REQUIREMENT IN MURABAHA

20 PRINCIPLES OF THE THEORY OF FISCAL POLICY IN THE ISLAMIC ECONOMIC SYSTEM

21 DEFINITION: FISCAL POLICY CINSISTS OF THE ACTIONS AND MEASURES TAKEN BY THE GOVERNMENT TO INFLUENCE THE SIZE OF PUBLIC REVENUES, THEIR COMPOSITION AND COLLECTION; AND THE SIZE OF PUBLIC EXPENDITURES, THEIR COMPOSITION AND DISBURSMENT; AND DIFICIT (SURPLUS), ITS SOURCES AND HOW TO DEAL WITH IT; AND THE MANAGEMENT OF ACCUMULATED PULIC DEBT.

22 OBJECTIVES OF FISCAL POLICY: THEY ARE THE SAME OBJECTIVES KNOWN IN CONVENTIONAL THEORY INFLUENCING RESOURES UTILIZATION IN DIRECTION OF FULL EMPLOYMENT INFLUENCING DEVELOPMENT AND GROWTH IN THE DIRECTION OF INCREASING THE EFFICIENCY AND PRODUCTIVITY OF AVAILABLE RESOURCES AND EXPANDING THEIR QUANTITY IMPROVING WEALTH AND INCOME DISTRIBUTION AND PROVIDING SOCIAL SECURITY ACHIEVING ECONOMIC STABILITY AND AVOIDING DEPRESSION AND SLUGISHNESS PROVIDING THE GOVERNMENT WITH PUBLIC REVENUES NECESSARY TO IMPLEMENT ITS ECONOMIC AND NON- ECONOMIC FUNCTIONS

23 STRUCTURE OF PUBLIC REVENUES: 1- REVUNUES OF PUBLIC PROPERTY: RENT OF KHARAJI LAND RENT OF OPEN LAND MINERALS RETURN ON PUBLIC SOURCES OF WATER AND ENERGY RETURN OF GOVERNMENT ENTERPRISES

24 2- ZAKAH: ZAKAH PROCEEDS ARE REVENUES EARMARKED FOR SPECIFIC SPENDINGS 3- CASUAL REVENUES: SUCH AS GHANIMA, FAY ESTATES OF THOSE WHO LEAVE NO HEIRS, FINES, GIFTS AND DONATION TO THE BAIT AL MAL: EXCEPT FOR FINES, GIFTS AND DONATIONS, THE OTHERS ARE RARE AND UNSUBSTANTIAL, ESPECIALLY NOWADAYS.

25 4- PUBLIC BORROWING: ITS SOURCES: INTERNAL EXTERNAL ITS MAIN INSTRUMENTS: PUBLIC DEBT BONDS: INTERNAL AND EXTERNAL LOANS FROM COMMERCIAL BANKS: DOMESTIC AND FOREIGN LOANS BORROWED FROM INTERNATIONAL INSTITUTIONS LOANS FROM FOREIGN GOVERNMENTS ITS SHARI AH CONDITIONS: AVOIDENCE OF RIBA PROTECTING THE PUBLIC INTERESTS FUTURE ABILITY TO REPAY

26 5- TAXATION: SHARI AH CHARACTERISTICS OF TAXES: 1- A TAX MAY NOT BE IMPOSED ON AN INDIVIDUAL FOR THE MERE REASON OF REDUCING ONE S WEALTH/INCOME. 2- A TAX IS A LAST RESORT: HENCE IT CAN BE LEVIED AFTER EXHAUSTING OTHER MEANS OF MOBILIZING FINANCIAL RESOURCES FROM REVENUES OF PUBLIC PROPERTIES, AND FROM PRIVATE SECTOR FINANCING OF GOVERNMENT S PROJECCTS, UTILIZING SHARI AH APPROVED MODES SUCH AS MUSHARAKA, MUDHARABA, IJARA AND SALE; AFTER EXHAUSTING THE POTENTIALITY OF PUBLIC BORROWING; AND AFTER SCRUTINIZING PUBLIC SPENDING FROM THE POINT OF VIEW OF NEED AND THRIFT.

27 3- TAX LEVY IS FOUNDED ON THE PRINCIPLE OF SOCIAL SOLIDARITY AND COOPERATION IN THE FULFILMENT OF WHAT IS SOCIALLY NEEDED, EXPRESSED IN SHARI AH AS FARD ALKIFAYAH. 4- TAX BURDEN MUST BE DISTRIBUTED IN ACCORDANCE WITH ABILITY TO CARRY, i.e., ACCORDING TO RICHNESS, EXPRESSED IN TERMS OF WEALTH AND INCOME TOGETHER. 5- TAX LEVY MUST BE APPROVED BY THE UMMAH BEFORE ENACTMENT. 6- PRIVATE SECTOR CONTRIBUTION TO FINANCING GOVERNMENT S ACTIVITIES AND PROJECTS: BY MEANS OF: CONTRIBUTION, and INVESTMENT

28 SHARI AH CRITERIA FOR OTHER PUBLIC RENENUES POLICIES: 1- CRITERIA OF PRICING PUBLICLY PRODUCED GOODS AND SERVICES: One) Not to permit any exclusive privilege for the rich: example: metropolitan street pavement and other city public services in most Muslim countries. Two) The principle is: market pricing of all public goods (where exclusiveness applies), e.g., children education is the responsibility of their parents. Exception: when such pricing leads to creating social injustice, as in educating poor and far rural areas children; which calls in the principle of mutual solidarity and social cooperation.

29 Three) The government is responsible for providing the public goods, such as internal and external security, as well as goods that affect a large number of people, if they are not otherwise available, these may include: drinking water (the well of Rumah), electricity, and mosques. Four) Avoiding utilizing public goods pricing as a vehicle for taxation, especially those goods derived from exploitation of common property (the Saying of pasture, water and fire flames). Five) For rental prices of Kharaji and open lands, fair market pricing applies since these lands are owned by the Ummah and the government acts as a mere agent. 2- CRITERIA FOR ZAKAH COLLECTION: 1. Rates of Zakah are fixed and not subject to change.

30 2. Dates of collection may be determined by fiscal policy. It may be advanced or delayed in accordance with public interests and objectives to achieve, with special concern about the interests of the poor, as a major category of recipients. 3. Collection may be made in kind or in cash as to serve the objectives of fiscal policy. 4. In all items that are subject to Ijtihad (opinion) Assets and incomes coverage of zakatability may be enlarged or narrowed in application to most just rules at each time. 5. Part of Zakah may be left to payers to dispose of it on their own, if this is to the best interests of the society, especially the poor.

31 STRUCTURE OF PUBLIC EXPEDITURES: ONE = INDISPENSABLE PBLIC EXPENDITURES ARE THOSE THAT FUFILL THE, AT ALL TIMES, OBLIGATORY FUNCTIONS OF THE GOVERNMENT: SECURITY: INTERNAL AND EXTERNAL. PUBLIC ADMINISTRATION. COURTS AND JUDICIARY SYSTEM. MANAGEMENT OF PUBLIC PROPERTIES, AND COLLECTION

32 OF DUES ACRRUED TO THE UMMAH. GUARANTEEING A MINIMUM, SUBSISTANCE LEVEL OF LIVING AND SECURING ITS MEANS. TWO = OTHER EXPENDITURE (THAT DEPENDS ON AVAILABILITY OF NON- EARMARKED REVENUES), THEY ARE DTERMINED BY THE UMMAH, AND INCLUDE: Education. Development. Social welfare and guaranteeing an adequate level of living. Producing convenient and easily accessible public utilities.

33 General call for Islam. Etc. SHARI AH CRITERIA FOR PUBLIC EXPENDITURE: AVAILABILITY OF NON-EARMARKED REVENUES; SPENDING EFFICIENCY: NO EXTRAVAGANCE; APPROVAL OF THE UMMAH; AND, AVOIDING EXCLUSIVE CLASS PRIVILEGES, EXCEPT TO THE BENEFIT OF THE POOR.

34 SHARI AH CRITEIRA FOR PUBLIC DEBT MANAGEMENT: 1- THE PRINCIPLE OF JUSTICE: IT IMPLIES THAT GOVERNMENT MUST PRESERVE THE REAL VALUE OF A PUBLIC LOAN, AND PROTECT IT FROM INFLATION, AND TO COMPENSATE LENDERS IN CASE OF VALUE-DECLINING OF THE LOAN. 2- AVOIDANCE OF RIBA AND OTHER PROHIBITED TRANSACTIONS:

35 3- FINANCING GOVERNMENT PROJECTS THROUGH ISLAMICALLY APPROVED MODES. DAY SIX A QUICK LOOK AT CERTAIN ISLAMIC ECONOMIC THEORIES

36 THEORY OF MONETARY POLICY THEORY OF FISCAL POLICY